That wall that's supposed to separate bank and brokerage accounts at affiliated institutions -- it ain't all it's cracked up to be. Neither is the purported scrutiny that financial institutions give to the account activity of elderly clients. Consider yet another case in which elderly customers fall prey to unscrupulous practices.

For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, James Arnold Busch submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of James Arnold Busch, Respondent (AWC 2013038441201, October 11, 2013).

Busch was first registered in 1989 and by 2000, he was associated with Wells Fargo Advisors, LLC, until his October 2013 termination.

Bank Shot

During all times relevant to this matter, the AWC asserts that Busch worked in various Wells Fargo Advisors' branch offices that were located in the firm's affiliated bank. As a result of the affiliated relationships, many of Busch's customers had both Wells Fargo brokerage and bank accounts, and Busch had access to his customers' bank account information.

From approximately 2006 to 2013, Busch allegedly utilized his customers' bank account information to misappropriate approximately $1.3 million from approximately eight of his Wells Fargo brokerage customers, most of whom were elderly women.

Give Him Some Credit

Prior to 2009, the AWC alleges that Busch engineered the thefts from his clients' accounts by contacting his credit card company via a paper debit memo that authorized payments from his customers' bank account to his credit card account. Busch provided his credit card company with the customers' Wells Fargo bank routing and bank account numbers to effectuate the transactions. Thereafter, between approximately 2009 and 2013, the AWC alleges that Busch typically called his credit card company's automated system to process the same transfers.

Moreover, the AWC alleges that at times, Busch purportedly liquidated securities from the customers' brokerage accounts in order to generate cash. The cash proceeds were transferred from the customers' brokerage accounts to the customers' bank accounts prior to Busch's misappropriation of the funds.

In accordance with the terms of the AWC, FINRA imposed upon Busch a Bar from associating with any FINRA member in all capacities.

Bill Singer's Comment

Frankly, I'm sort of getting tired of writing about these rip-offs of elderly customers involving con artists who find a way to straddle the supposed line between brokerage and bank accounts at affiliated institutions. Sure, it's nice that Wells Fargo managed to detect Busch's activity; however, let's not lose sight of the fact that the fraud (if not crimes) started as far back as 2006 and went on without setting off any internal compliance alarms until apparently as recently as 2013 -- that's some seven years of smoke before anyone grabbed a fire extinguisher to put out the fire. Also, keep in mind that Busch converted $1.3 million. We ain't talking about someone dippin' into a few unwatched accounts and taking out a few handfuls of chump change. Finally, let's remember that the victims were elderly individuals -- among the most vulnerable targets.

Although both Wells Fargo and FINRA deserve credit for going after Busch, let's not get too carried away with what essentially amounts to reading toe-tags in the morgue. Much of what passes these days for in-house compliance and industry regulation is little more than after-the-fact action -- pretty much the guy with the broom behind the elephants in the circus parade.

BILL SINGER is a lawyer who represents securities-industry firms, individual registered persons, Wall Street whistleblowers, and defrauded public investors. For over three decades, Singer has represented clients before the American Stock Exchange, the New York Stock Exchange, the Financial Industry Regulatory Authority (formerly the NASD), the United States Securities and Exchange Commission, and in criminal investigations brought by various federal, state, and local prosecutors. He has the distinction of representing witnesses during Congressional investigations. In 2015, Singer achieved a significant award in excess of $1 million from the Securities and Exchange Commission on behalf of a whistleblower client.

Singer is presently Of Counsel to a law firm and the publisher of the BrokeAndBroker.com Blog, which was rated as one of the industry's top eight destination websites and the leading legal/regulatory blog by "Investment News."

Before entering the private practice of law, Singer was employed in the Legal Department of Smith Barney, Harris Upham & Co.; as a regulatory attorney with both the American Stock Exchange and the NASD (now FINRA); and as a Legal Counsel to Integrated Resources Asset Management. Singer was formerly Chief Counsel to the Financial Industry Association; General Counsel to the NASD Dissidents' Grassroots Movement; and General Counsel to the Independent Broker-Dealer Association. He was registered for a number of years as a Series 7 and Series 63 stockbroker.

Singer regularly appears as a commentator on television and radio, and is frequently quoted in the press. He is an outspoken critic of ineffective regulation and an advocate for economic and political sanity.